Signaling in an Ebay auction – what it is and why it matters

As a bidder what you do has meaning behind it. You don’t reveal your intentions publically. So other people can (try to) interpret your intentions by observing how you behave. Signaling is a term that describes how a bidder, (or auctioneer) reveals their intentions before during and after an auction. How they play out there strategy to be successful. What’s important to remember is that it’s not just what you do that provides information, but it’s also how you do it that gives helpful clues to your rival, if you’re the bidder, and to the bidders if you’re the auctioneer.

As the auctioneer, you’re telling people things, (signaling), in how you set up and finish the auction, and how you run your business. How you behave as the auctioneer, in large part, is the most important signal to bidders. Your messages that clarify how you’re going to do things, and then your actual behavior that reinforces that message is like a liturgy, (routine), that people become very comfortable with as they get to know you as a seller. Become erratic, or inconsistent, and your bid action will decline.

Bidders are signaling things too, (revealing more and more by what they do and also how they do it). Each signal provides more intelligence to the other participants.

Some bidders go in early and with a very high bid price, signaling to everyone that they are not to be messed with. They are depending on the benefits of the first mover advantage to discourage other bidders. They hope that if the item jumps up in price quickly, that it will discourage subsequent bidders from becoming emotionally invested in the item and participating in the auction.

Some bidders hold all their excitement as a secret until the last 30 seconds. They are hoping for the last mover advantage, in the hope that they will catch their competition not paying attention.

Some bidders test their way up the ascending price ladder dollar by dollar, until they’ve discovered everyone else’s (current) maximum bid. Of course they only know what people are revealing, not peoples true maximum bid necessarily. They are depending on a methodical, ‘war of attrition’ strategy to test and beat any competition.

To the serious bidder, there are a lot of subtle clues that can make a dramatic difference. These pieces of information continue to answer a simple question, in little ‘chunks‘ like putting a jigsaw puzzle together piece by piece. What‘s the message on the jigsaw puzzle that is slowly being revealed?

“How committed is my competition?“

“They are only committed up to $50 at the moment, that I‘m aware of”. And ultimately, the final ‘truth’ about the bidders commitments will be revealed in the last few seconds of the auction.

Here is a list of subtle clues that begin to be revealed as the auction unfolds:

The number of bids. (always good because bids prompt more bids, and draw a crowd).

The speed of the bids, (early in the auction tells people that there are bidders just waiting to get this, and they are not messing around).

The speed of the counter-bids. Bidders always test each others maximum bid, and if an aggressive bidder submits a very high price, and it‘s immediately countered, they are clearly given the message that there is someone who is every bit as committed to the item as they are, and more. A slower counter bid means that you, as the top bidder, are the most publicly committed to the item, and of course you hope that means you’re actually the most committed. But strategic bidders know it’s sometimes best to withhold their bids until later in the auction.

As the auctioneer, you’re signaling is critical. Here are a few things to keep in mind as you construct your listing and include auction details, (or off-Ebay details on a blog or newsletter).

Clarify whether second chance offers will be extended.

Make it clear whether you item is One Of A Kind, or part of a limited edition set.

Make it clear how quickly you’re going to sell the entire set.

Remind people what your similar items sold for, (This is called anchoring technically).

The more information you share about your intentions, the stronger the bid action will be, because people will be armed with the facts about how best to get one of your rare items.